Colleges and universities would be banned from using revenue from federal student aid for their advertising and marketing expenses, under a bill introduced on Wednesday by two Senate Democrats.
The legislation, sponsored by Sen. Kay Hagan of North Carolina and Sen. Tom Harkin of Iowa, would prohibit institutions from using federal aid such as Pell Grants and Post-9/11 GI Bill funds for advertising, marketing, and recruitment. The bill is similar to a law that bans the use of federal higher-education funds for lobbying, but it was not immediately clear how such money could be readily separated from colleges’ other revenue streams, or how the new rules would be policed.
Mr. Harkin, who is chairman of the Senate Health, Education, Labor, and Pensions Committee, said the federal dollars would be better spent on the direct costs of education, such as instruction, and career-placement services rather than recruiting.
“There is nothing wrong with advertising and marketing,” he said at a news conference. “What we’re saying here is that you just won’t be allowed to use taxpayers’ dollars to do so.”
The legislation covers all colleges eligible to receive federal student aid, but the bill is seen as taking aim in particular at for-profit colleges, many of which rely heavily on federal aid money to stay in business. Fifteen of the largest for-profit higher-education companies receive an average of 86 percent of their revenues from federal student-aid funds, and spent an average of 23 percent of their budgets on marketing, according to an analysis conducted by Senator Harkin’s committee.
The committee’s analysis of for-profit colleges’ revenue statements found that Bridgepoint Education spent more than $2,000 per student on recruiting in 2009, but only $700 per student on instruction.
The Apollo Group, which owns the University of Phoenix, spent 22.5 percent of its revenue, or more than $1-billion, on sales and marketing in the 2011 fiscal year, according to Jeffrey M. Silber, an analyst with BMO Capital Markets.
While marketing budgets in the for-profit sector can approach 40 percent of revenues, nonprofit institutions spend an average of 0.5 percent of their revenues on marketing, the committee’s analysis found. <Read more.>